How to Price Your Service Based Business
Sep 09, 2021Operating a service-based business can come with its own set of challenges as it pertains to setting your price. Unlike a product-based business that offers its clients something they can hold and look at, a service-based business is more intangible. This can make it much more difficult to determine what your service is actually worth to you and to your client. Your ego plays a large part in this process, as well. If you feel a little less confident, you may be pricing your service too low, whereas, feeling a bit overly confident could price you out of your market. So, how do you find that sweet spot that will help your business to continually grow, while also remaining flexible enough to solve your clients’ problems? The answer to this question is largely based on your business model, but there are a few simple steps that we can walk through that may help you to find your ideal price.
Things to Consider
The first thing you have to do before setting your price is to consider your overhead costs. This is a relatively easy step for most of us. If you do what I do, for example, your overhead cost may only be your time and knowledge. If you run a business that requires materials, such as a painter or contractor, then the material cost will also need to be factored in. Don’t forget to consider things like shipping costs, licensing and certification fees, continuing education, rent and any other costs, both direct and indirect, associated with keeping your business up and running.
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Next, consider your market. See if you can get a gauge of the pricing models set forth by your competition and gain a better understanding of the market stability. This information is absolutely crucial to setting your own price. You could edge yourself out of the market if you set your price too high, sending potential clients to engage with your more reasonably priced competition. On the other hand, if you set your price too low, you run the risk of appearing as though you don’t have the same level of expertise as your competitors. When you know where the high-end and low-end fall in your market, you can start to look for that sweet spot somewhere in the middle.
Your final step is to consider the perceived value and this is going to require a deep understanding of who your ideal customers are and what their expectations are. How are they looking at your business and what do they feel your service is worth to them? You might be asking yourself, “How in the world will I know the answer to that?” In response, I would say that you may not get it right the first time, and that’s okay. Start with a price point that feels good for you with the understanding that you can always modify as you go along. In fact, it would make sense that, as you gain experience, knowledge and expertise, your prices will also rise. Just remember that it’s exponentially easier to go up in price than it is to start too high and then have to go through the uncomfortable process of explaining to your clients why you are dropping your prices.
Final Thoughts
If there’s only one thing that you take away from this conversation today, I implore you not to underestimate your own value. This is particularly important for my women entrepreneurs, as we tend to do this more often. Consider the solution and the transformation that you are able to bring to your clients. If anybody questions your pricing, all you need to do is remind them that your price reflects the value of the service that you are offering. You are not obligated to go into a detailed explanation. You may, however, choose to remind your client what they will be getting when they agree to work with you so that they can refocus on the value that is being offered.
So, that’s it! It’s really that simple. Follow these steps and you will have a starting price point chosen in no time. If you’re still wanting to learn more about it. Don’t forget to join our Facebook group, “Be a Confident Entrepreneur: Gain Confidence and Grow Your Income” or contact me directly via DM or my website, www.tracybeavers.com, and book a discovery call to see how we might work together or check out my other online offerings.
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Video Transcript
If you're in a service based business where your prices are set at your discretion, it can be tough to figure out what to charge. Right. We're talking about this topic today and I'm going to give you tips to get your pricing right. So let's dive in, because this topic can be a tricky one. It pertains largely to service based businesses, but those of you that sell products listen up because this is going to help you too. It can be hard to know how to price our service because it's intangible. We can't put our hands on it. The client can't put their hands on it. It's not as easy to sell as a hard good that you can hold the smell. Touch all that stuff, right? And as business owners, I talk about this a lot in my trainings.
Our egos are completely intertwined with our work. So depending on how confident you feel, you may be setting your price too low or you may be setting your price way too high. We've got to find the sweet spot for your particular service. You want to set your pricing so your business is scalable so that it grows. Yet we have to be flexible enough to solve our clients problems. Sometimes a one size fits all approach for pricing where everybody pays the same rate is the best. Sometimes custom pricing for each client is the solution. It really depends on what kind of business model you want to have and what will grow and scale for you. Here are some easy steps to walk through on how to set your price and know with confidence that you are in the right sweet spot.
Number one, I want you to look at your costs. This is an easy thing to do, especially if you're like me and you're a service based solopreneur. My cost is my time and my knowledge. If you use materials like, let's say, you're a painter, but obviously you want to factor in the cost for materials. Also, consider your time invested, your materials required. Other things like Do you do? Do you have to do shipping? Do you have international fees, different charges like that? And also consider things like Do you need special licensing certifications, content, continuing education? Be sure to cover all the costs you have with running your business, both direct and indirect.
Number two, Look at your market. This is super important for obvious reasons. What is your competition charging and how is the market holding up? If you set your price outside what your geographic market expects and is used to paying, your clients will go to your competition, and you won't have sales. Setting it too low, this sends the message that your services might be cheap and not as good as your competition. And we definitely don't want that. So this is where the sweet spot comes in price and high enough to show the value and quality of what you're offering, but not too high that you price yourself out of business.
Number three, I want you to consider the perceived value. You might be thinking what? This is one of those psychological things that factors into pricing and entered the transaction. This is where we have to know our customers and their expectations. How do they perceive your business and how do they perceive the value of what you're offering? Are you going to get this right the very first time you go to set your prices? Maybe. But most likely not. It's OK. I didn't. I don't know very many people that do. We have to start somewhere, so sometimes we just dive in.
My prices have increased since I started coaching and adding more value to my clients, and my prices are probably going to go up again real soon because I'm always adding more to my coaching. So set a price start somewhere. Be ready to tweak as you go. It's easier to go up in price than it is to set it way too high. Find out you need to lower it, and that can be kind of an uncomfortable conversation explaining it to your existing clients.
One big thing I want you to take away from today if you remember nothing else. Listen up. Come back to me for a second. If you if you've got other things going on in the room, your price reflects your value. Do not underestimate the value of what you bring to your clients, especially you ladies, because as women, we tend to not charge what we're worth and we have to stop that nonsense. Think about the value, the solution, the transformation you bring to your clients. And if someone asks you why your prices are so high or makes a comment like you're too expensive or something like that, you can just say the price reflects the value. As we've talked about so many times before, you do not have to explain or apologize for your price.
Your client may want to review what all they're getting with your service, but you don't owe them an explanation of why you charge what you charge. The price reflects the value. And as always, I want to know what you think, what you'd like to learn, what you'd like to hear more of. It's my goal to bring you value and be of service. So don't forget to subscribe so you don't miss any of our great content and comment to and let us know your biggest takeaways.
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